27 February 2015

What's your value of water?

The 2015 Water Smarts Calendar [free download] has an exercise every month to help you understand your relations -- and others' relations -- with water.

The January activity focussed on the values of water, and people gave useful answers to the following questions:

Pretend you have NO WATER SERVICE in your house. You need to walk 5 minutes from your house to get "free" clean water from a water tap.

What is the MAXIMUM you would pay someone to bring 10 liters (2.5 gallons) of clean water, per day, for your personal use?
The average answer here was US$5 for ten liters. The lowest was $0 ("I won't ever mind walking 5 minutes from my house everyday if that ensures free clean potable water availability" or "We walk the dog, so likely would walk it up there and get water daily."), and many wrote $10 -- an amount that's closer to the cost of bottled water ($1/liter) than tap water ($2-3 per 1,000 liters). These answers perhaps reflect the amazing gap between our water values and the price we pay.

How much would you pay for 10 MORE liters of clean water, per day?The average answer here was US$3.80 for ten liters, but a minority of people gave answers that were the same as before or higher. Higher answers do not make sense from an economic perspective ("demand slopes down" means that we are willing to pay more for the first units of water than later units, given that we already have the first units), but perhaps those answers reflect some notion that water should be cheaper because it is a human right.

Respondents also gave some interesting comments:

"I use my daily living as my daily workout, for example, I use the stairs at work almost exclusively instead of elevators to get to my cube on the 13th floor. My attitude would be to take on the water fetching as a new exercise, so I wouldn't pay much for someone else to do this for me. However, I have a wife and two kids, so I'm not sure I could accommodate their water needs as well."

"I am assuming a young kid would pay the equivalent of a bag of Flamin Hot Cheetos, which are a very popular treat and good example of value."

"This is the amount I would be willing to pay RIGHT NOW because I live in Sao Paulo, and I'm sure the situation will be really bad in the next months (we are in a severe drought)...with prices increasingly crazily."

And finally: "We live in a rural area, on a well, in a drought, we've cut back by 50%. The neighbor irrigates 5 acres for his horse on same aquifer. Question: Should I shoot him?"
The short answer is no. The longer answer is watch your well-head (water level), to see if it's falling. If so, you may need to have a chat with your neighbor(s) about paying you for "your" water.

Note that these comments -- and the results of willingness to pay -- were more about the value of water service (water brought to the house) than the value of water (how much to get 10 liters if you could only buy it). Those values are going to be higher.

Bottom Line: Our values for water (service) vary a lot. That means we need to find ways to make sure that those with low values get access to some water while others with high values are allowed to buy more. The thousand-to-one difference between price (cost of service) and values (here) means that it should be easy to charge enough to run the system without depriving anyone while dampening "excess" demand.

Please complete the February exercise ("what's your customer class") so we can continue these interesting discussions...